Internet and economic growth – Newspaper

IN 2017, Facebook founder Mark Zuckerberg published a manifesto on the future, arguing that connecting everyone to the internet is necessary to build an informed community. His thoughts echo those of many others who have argued that access to the Internet is necessary to solve the most pressing socio-economic problems of our time.

Originally a Defense Advanced Research Projects Agency (DARPA) project to improve communications systems for the US armed forces, the Internet is now an integral part of our lives. From landline phones, which can take a long time to connect, to the Internet – everything is now just a click away. Yet many people around the world do not have access to it or access is uneven, slow and cumbersome. Recognizing its importance, significant sums of money have been invested in projects around the world to expand access to the Internet. For example, a new initiative called LOON comes up with the innovative idea of ​​extending internet access through stratospheric balloons. Since the height of traditional antennas is limited and it may not be possible to set them up in many places due to reasons such as security, balloons can facilitate access in such areas without the need for towers.

What effect could this crucial technology have on economic growth? To consider the question, it is important to understand the nature of such technologies.

It’s what experts label as a “general technology.” Martin Mühleisen (The Long and Short of the Digital Revolution) calls such technology “a technology that has the power to continuously transform itself, gradually branching out and increasing productivity across all sectors and industries”. The changes they make often have huge long-term benefits, but they are also deeply disruptive. Historically, there are only three known examples of such a phenomenon, namely the steam engine, electricity and the printing press.

It may not be enough just to have universal access to the Internet; there should also be a plan to optimize it.

The magnitude of the change that this technology has brought about has been enormous. The examples are too many to list in one article. For example, a 2017 report by McKinsey calculated that digitization would completely transform about 50 million jobs in the US. At the beginning of the 21st century, smartphones were still unheard of. Now an estimated five billion people have them. More importantly, the pace of transformation continues to accelerate. From quantum communications to 3D printing, the world is constantly moving, which has huge implications for the economy. Unlike the previous global pandemics (e.g. the Spanish flu of 1918) that completely turned the functioning of the economies upside down, a significant part of the economic devastation of Covid-19 has been prevented thanks to the availability of the internet that made working from home possible. . of the global economy is running — albeit at a slower pace. Therefore, the availability of the Internet has become absolutely crucial in today’s economy, a fact that has prompted Dr Nadeem Haq, Vice Chancellor of the Pakistan Institute of Development Economics, to treat the Internet as a right.

But does the availability of the internet automatically translate into an increase in per capita income and total income? Whatever transformation has taken place, was it by accident or on purpose?

As Mühleisen points out, many benefits of general-purpose technologies like the Internet come not just by adopting it, but by adapting to it. He gives the example of the ride-sharing company Uber, which uses digital technology to provide better services. Similar sentiments have been shared by other notable observers. One of the most famous quotes related to technologies such as computer and the Internet comes from Nobel laureate economist Robert Solow. In 1987, when personal computers and the Internet took on cult proportions and America’s economic growth began to be attributed to this technology, he famously joked that “the computer age is everywhere, except in productivity statistics.” This became known as the Solow Paradox. Simply put, Solow believed that the presence of computers and the Internet is no guarantee of income and productivity growth.

In the context of the above, what can we say about the process of the Internet and economic growth? Does it have any lessons for Pakistan in particular? We can take a simple example to understand where we stand and how the process can benefit the economy and society. The Pakistani government began adopting computer technology in government organizations in the early 1990s. This was supplemented with training in various programs (including the Microsoft Office package). Ideally, this should have resulted in a significant reduction in paper-based work. But files and papers still make up a large part of government administrative affairs, and the costs associated with them are increasing. Likewise, the digitization of land records should have led to an end to the role of patwaris. Yet they remain as strong and influential as they have ever been. At the other end of the spectrum, we have the example of the National Command Operation Center using technology effectively to implement smart lockdowns.

This brings us to what Mühleisen emphasized: it is not just about adoption, but above all about adapting. Those who have adapted well and adapted their system to the technological trends caused by the Internet (private or public sector) have discovered many advantages. Amazon, Facebook, AliBaba and eBay are just a few examples of how the availability of a disruptive, universal technology can bring benefits worth billions of dollars. More importantly, of course, was the fact that people like Jeff Bezos had plans to optimize it.

So for countries like Pakistan, just having universal access may not be enough; there should also be a plan to optimize it. For example, most public offices have free internet connections, but it doesn’t help if they are used to search for plots or watch live news events. On the other hand, violent organizations such as the TTP have also greatly benefited from the presence of the internet, allowing them to spread their propaganda.

At the moment there is no such plan and Pakistan is a bit of a Solow Paradox.

The writer is an economist and researcher at the Pakistan Institute of Development Economics.

Published in Dawn, August 13, 2021

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